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TMI Blog2017 (3) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... d in A.Y. 2012-13 and 2013-14. Thus, these grounds may be treated as allowed in accordance with the aforesaid directions. Under these circumstances, we do not find it necessary to adjudicate the other issues raised by the assessee with regard to these grounds. Disallowance on account of Sundry Debtors written off by the assessee during the year - Held that:- CIT(A) has passed nonspeaking order without giving proper reasoning. We find it appropriate to send this issue back to the file of the AO. The assessee shall submit on record requisite details and evidences to justify its claim. The assessee is required to show that the impugned amount has already been included in its income in earlier years so as to claim the benefit of paid debts u/s 36(1)(vii). The AO shall decide this issue again after considering all the facts and circumstances, as may be brought on record by the assessee. The assessee is also permitted to make any alternative claim as may be permitted under the law. Disallowance of TDS written off during the year - Held that:- Disallowance has been confirmed by the lower authorities without examining facts and figures. It was shown that these amounts were recoverable from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) correctly deleted the disallowance made by the AO For A.Y. 2012-13 disallowance sustained by the Ld. CIT(A) u/s 14A is hereby confirmed. It is noted that exempt income has been earned by the assessee during the year under consideration. Nothing has been brought before us that why disallowance of 0.5% of average value of investments as envisaged under rule 8D(2)(iii) should not be made in the given facts of this case. Further, nothing incorrect has been pointed out in the order passed by Ld. CIT(A) while confirming the disallowance. X X X X Extracts X X X X X X X X Extracts X X X X ..... account of interest accrued on the amount of capital contribution made by the assessee in the partnership firms namely Kamanwala Lakshachandi Todays Developers (KLTD) and Kamanwala Lakshachandi Todays Construction (KLTC). 5.1. The brief background is that the AO observed during the assessment proceedings that the assessee had made investment by way of capital contribution in the aforesaid partnership firms from which no interest on capital has been offered for taxation even though the deed of partnership firm provided for the same. During the course of assessment proceedings, the assessee made submissions before the AO to argue that no interest had accrued during the year under consideration, therefore, same was not credited in the books of accounts. The AO was not satisfied with the arguments of the assessee, and therefore addition was made by the AO for an aggregate amount of ₹ 4,07,30,483/- (i.e. ₹ 2,91,40,922/- +1,15,99,516). 5.2. During the course of appeal before Ld. CIT(A), the assessee submitted copy of partnership deed entered with these firms and also filed terms of agreement of loan sanction letter of credit facilities dated 16.07.2008. The assessee also f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified and not permitted under the provisions of income tax law. Therefore, keeping in view alternative prayer of the assessee, we direct that interest income offered in the subsequent years should be excluded from total income to remove the double addition. The AO is directed to pass requisite rectification order in Assessment Years 2012-13 & 2013-14 so as to give effect to our order. The assessee is also directed to furnish requisite details and documentary evidences to the AO to show that same interest income has already been offered in A.Y. 2012-13 and 2013-14. Thus, these grounds may be treated as allowed in accordance with the aforesaid directions. Under these circumstances, we do not find it necessary to adjudicate the other issues raised by the assessee with regard to these grounds. 6. Ground No.2: This ground deals with the action of lower authorities in making disallowance of ₹ 9,79,200/- on account of Sundry Debtors written off by the assessee during the year. 6.1. During the course of assessment proceedings, it was noted by the AO that assessee has written off a sum of ₹ 9,79,200/- on account of lease rent receivable. The AO asked the assessee to establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ady been included in its income in earlier years so as to claim the benefit of paid debts u/s 36(1)(vii). The AO shall decide this issue again after considering all the facts and circumstances, as may be brought on record by the assessee. The assessee is also permitted to make any alternative claim as may be permitted under the law. With these directions, this ground is restored to the file of AO and may be treated as allowed for statistical purposes. 7. Ground No.3: In this ground, the assessee is aggrieved with the action of lower authorities on account of disallowance of ₹ 1,99,905/- being the amount of TDS written off during the year. 7.1. The brief background is that the AO had made disallowance of this amount for the same reasons as in Ground No.2 above and the disallowance was confirmed by the Ld. CIT(A) in the similar manner. 7.2. The brief background as brought before us by Ld. Counsel is that as assessee had paid gross amount to various parties and also paid the TDS, therefore an amount aggregating to ₹ 1,99,905/- was shown as recoverable from these parties. Since the assessee could not recover said amount from these parties, therefore same was written off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... followed when there is absolutely no difference in the facts of the case. Perusal of the 26th and 27th Annual Report with respect to the related party transaction is reproduced as under for ready reference:- 27th Annual Report Transa ction Associates Joint venture Key Management personal Other Director Relative of key managerical personal total Rent paid 7,68,000 (7,68,000) - 5,00,000(-) - (4,52,000) 4,24,000 (3,56,000) 16,92,000 (15,76,000) 26th Annual Report Transaction Associates Ke Management personnel Other director Relatives of key managerical personnel Total Rent paid 6,68,000 -- 4,52,00 3,56,000 15,76,000 The same is carefully perused and on perusal of the above, it is clearly seen that facts of the earlier year is not same as in this year. No rent was paid to key management personnel in A.Y. 2010-11 and it was paid in A.Y. 2011-12. The copy of rent agreement of Smt Sudha Gupta reveals that leave and license period was from 1.11.2010 till 31.10.2012. i.e. during the relevant year under consideration. It is not correct to say that once the rent paid is allowed in any one assessment year and if the rent is increased or new related party is intro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payer (i.e. assessee). Further, without prejudice, entire amount could not have been disallowed u/s 40A(2)(b). 8.4. Per contra, Ld. DR submitted that nothing has been brought on record to show that how and in what manner these assets were used for the purpose of business of the assessee. Only bald statement has been made that too unsupported with any evidences. 8.5. We have gone through the facts and circumstances of the case as well as orders passed by the lower authorities and also the submissions made before us. Undoubtedly, the assessee is best judge to make any expenditure keeping in view commercial expediency and best interest of its business. But when a question is raised by the AO about the business necessity and genuineness of expenditure, especially when the payment has been made to related parties, there is bounden duty on the shoulders of the assessee to show that payment has been genuinely made and same has been utilized for the purpose of the business of the assessee. 8.6. The facts of this case as were brought before us show that it was claimed by the assessee that the payment was made towards rental for using 50% share of the Flats owned by these two persons. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture project with M/s Kamani Tubes Ltd. for development of leasehold property belonging to the said company as per agreement dated 22nd April 1995. As per the agreement the assessee had reserved all the rights for net realization of sale of the property. But, the assessee was not comfortable about the ability of the said company to work as per the agreement. Therefore further payments were stopped. Thereafter, the said company filed a case against the assessee company before BIFR. Under these circumstances, since the assessee company considered the debt (i.e. aforesaid amount given to the aforesaid company) as doubtful, it was written off. It was also submitted that subsequently part of the sum was recovered in subsequent years and has been offered to tax. However, AO was not satisfied with the claim of the assessee. After analyzing the entire facts, it was held by him that the impugned claim was capital in nature and not revenue expenditure. Thus the claim was disallowed. 9.2. Before the Ld. CIT(A) detailed submissions were made but he was not satisfied with the same. The disallowance made by the AO was confirmed without giving reasoning in detail on facts. 9.3. Before us, Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stage. Further, requisite facts regarding subsequent recovery and its inclusion in the income of subsequent years have also not been properly brought on the records and anlysed by the lower authorities. Under these circumstances, in the interest of justice, we find it appropriate to send this issue back to the file of the AO. The assessee shall bring on record complete facts and evidences on record and shall also place judgments in support of its claim as may be considered appropriate. The AO shall give adequate opportunity of hearing and shall decide this issue afresh after taking into account entire material as may be brought on record by the assessee. The assessee shall be free to raise all legal and factual issues in this regard. With these directions this issue is sent back to the file of the AO. This ground may be treated as allowed for statistical purposes. 10. Ground No.6: This ground deal with the action of the lower authorities in making disallowance of long term capital loss of ₹ 24,01,139/- arising from sale of shares. 10.1. The brief background is that it was noted by the AO that in the computation of income filed along with return, the assessee company had c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases Pvt Ltd to associated person. 10.4. Being aggrieved, the assessee filed before the Tribunal. 10.5. During the course of hearing before us it has been submitted that section 40A(2)(b) has been wrongly applied as the said section does not apply on loss of sale of assets but only applies upon claim of expenditure made in the Profit and Loss Account for computing income the head income from business. Further, merely because the promoter of the said company hails from the Jain family, it would not come automatically within the definition of the term relative as envisaged under the law. It was also submitted that the shares were sold as they had become paper because the investee company was closed down long back. 10.6. Per contra, Ld. DR submitted that since the assessee could not bring sufficient evidence to substantiate this claim, therefore it was rightly disallowed by the lower authorities. 10.7. We have gone through the entire facts and circumstances of the case. It is noted that section 40A(2)(b) has been applied by the lower authorities without bringing on record as to how the said transactions is covered within the ambit of these provisions. It is true that since loss h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y suo motu disallowance u/s 14A. Under these circumstances, he worked out disallowance u/s 14A on account of interest for ₹ 1,37,37,50/- and on account of administrative expenses for ₹ 13,67,600/- aggregating to ₹ 1,51,05,130/-. 11.1. During the appeal before the Ld. CIT(A) detailed submissions were made and it was vehemently submitted that no exempt income had been earned during the year. Accordingly, Ld. CIT(A) deleted the disallowance made by the AO by observing as under: It is seen that the appellant's main contention is that if there is no exempt income, then the disallowance u/s 14 is not triggered off. The appellant has given various judicial findings on the issue. The Assessing officer has not disputed the facts that the appellant has not received any exempt income during the year. I find merit in the submission of the appellant that unless and until, there is receipt of exempted income for concerned assessment years, section 14A cannot be invoked. This view has also been confirmed by Hon'ble High Court of Punjab & Haryana in the case of Lakhani Marketing Inc (49 taxmann.com 257) and Honbie High Court of Allahabad in the case of M/s Shivam Motors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st that offered by assessee in A.Y. 2012-13. 2.On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming the disallowance of ₹ 10,04,000/- paid as rent in view of section 40A(2)(b) of the I.T. Act, 1961 and addition of the same to the total income of the assessee. 3. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming the disallowance of the expenditure of ₹ 10,48,931/- in view of section 14A of the I T Act, 1961 and addition of the same to the total income of the assessee. 4. The Ld. CIT(A) erred in confirming the interest charged u/s 234B & 234C of the I. T. Act . 5. The Ld. CIT(A) erred & invoked the Penalty Provisions u/s 271(1 )(c) of the Income Tax Act. 6. The assessee craves leave to add, alter or amend the existing grounds of appeal on or before the date of hearing. 13. Ground No.1: This is same as Ground No.1 of assessee's appeal for A.Y. 2011-12, therefore, our order for AY 2011-12 applies on this ground mutatis-mutandis on facts of this year. The AO is directed to follow our order for A.Y. 2011-12. This ground may be treated as allowed in accordance with our directions as contained in A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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